Ecuador After Correa

Rafael Correa’s tenure has seen an expansion in the political participation of the poor, and the proliferation of new collective rights and democratic institutions. These gains stand alongside crackdowns on social movements, the weakening of left opposition parties, and the centralization of power in the executive. After a decade of left rule, Ecuador is at once more equal and more unequal, more democratic and more centralized, radically transformed and mired in historic patterns of domination that date to the colonial era. These antinomies have their origins in a left populism that made a pact with oil and mining—a story that has echoes across the continent.

Contradictions and dilemmas of left populism in Latin America

Lenín Moreno

On April 2, the night he lost the runoff election by slim margin of 2 percent, Guillermo Lasso was not as conciliatory as such occasions usually demand. The wealthy banking magnate was forthright in denouncing his leftist adversary and that night’s victor, Lenín Boltaire Moreno. Lasso claimed electoral fraud, vowed to defend the people’s will, and warned Moreno, and sitting president Rafael Correa, not to “play with fire.” Lasso’s supporters instantly put his words into action. Thousands stormed the national electoral commission office in Quito. In Guayaquil, there were scuffles between police and a pro-Lasso crowd—images showed a sea of white shirts, dotted with mostly male faces wet with perspiration—that was dispersed with tear gas.

After a decade of political economic transformation—marked by Ecuador’s first democratically elected leftist administration (2007–present) and a commodity boom (2000–2011) that had financed an ambitious panoply of public works and social programs—both candidates had framed the election in epic terms: this would be the continuation of leftist rule, or its exhaustion. In the domestic press and international media, the election was cast as a bellwether for the future of the region’s “pink tide,” the sweep of leftist governments that began with Hugo Chavez’s election in 1998 and crested in 2009, when left administrations governed two-thirds of the region’s population. There was some truth to this narrative. Moreno had been Correa’s vice president until 2013. Lasso would have constituted a break: his platform augured a return to the neoliberal policies that had prevailed from democratization in 1979 until Correa’s inauguration.

The sense of a critical juncture—exuded by each candidate’s motto: “the future is now” (Moreno) and “let’s go for change” (Lasso)—was enhanced by recent events elsewhere on the continent: the defeat of the left at the polls in Argentina, the removal of the president of Brazil by a right-wing parliamentary coup, roiling economic crisis in Venezuela, and—not unrelated—a precipitous drop in oil prices, along with falls in other commodities, which affected countries throughout the region. Correa’s rhetoric, in which he continually cast his government as a messianic force, a secular redemption from the “long night of neoliberalism,” contributed to the scale and ferocity of the contest.

As usual, however, such polarized simplifications obscured the actual dynamics at play, and the contradictory legacy of Correa’s government. Often classed alongside Evo Morales and the late Hugo Chavez, Rafael Correa did break in significant ways from neoliberal orthodoxy, and his administration portrayed itself, with some justification, as a kind of “post-neoliberal” government. Correa renewed the state’s role in economic planning and in paying off what he and other Latin American leaders called the “social debt” accumulated under decades of austerity. Socioeconomic indicators reflect the achievements: poverty has been slashed and income inequality reduced, while outcomes in health, education and nutrition have improved. At the same time, wealth has been concentrated in fewer hands, while inequality in access to land and water remains stark.

Correa’s tenure has seen an expansion in the political participation of the poor, and the proliferation of new collective rights and democratic institutions. These gains stand alongside crackdowns on social movements, the weakening of left opposition parties, and the centralization of power in the executive. After a decade of left rule, Ecuador is at once more equal and more unequal, more democratic and more centralized, radically transformed and mired in historic patterns of domination that date to the colonial era. These antinomies have their origins in a left populism that made a pact with oil and mining—a story that has echoes across the continent.

From 1990 through the mid-2000s, Ecuador, like many of its neighbors, was witness to a fierce, at times violent struggle between neoliberal elites and popular movements. Political and economic elites obsessively repeated the mantra of market liberalization, over time finding their path blocked by an increasingly large indigenous movement. Reaching an apex in the late ’90s, that movement was considered to be the most powerful indigenous movement in the hemisphere. Its activity led to the downfall of two presidents, and its demands for a more democratic and inclusive political order played a key role in bringing about the 1997 and 2007 Constituent Assemblies; the 2008 Constitution contains significant advances in the recognition of indigenous collective rights.

Ecuador’s national indigenous federation, the CONAIE (Confederación de Nacionalidades Indígenas de Ecuador)—a multi-tiered organization comprised of regional federations, which in turn encompass base-level organizations—had deep roots in civil society. It worked in concert with urban neighborhood associations, and peasant and labor unions. Their political program interwove ethnic and class dimensions, building on a longer history of radical peasant unions in the highlands and struggles for territorial self-determination in the Amazon, including demands for bilingual education, land redistribution, the nationalization of oil, the transformation of the economy along communitarian and ecological lines, and the recognition of ancestral territories. At key moments, the CONAIE and its popular sector allies mobilized to resist austerity measures, the privatization of communal lands and of oil, and free trade agreements.

By the early 2000s, this coalition had begun to fray, and the indigenous movement as a national political force experienced a decline in capacity and legitimacy. The primary reason was the CONAIE’s participation in a short-lived coup, led by Col. Lucio Gutiérrez, that deposed President Jamil Mahuad, and their subsequent support for a democratically elected Gutiérrez administration. Once in power, Gutiérrez swiftly abandoned his campaign promises and signed a loan agreement with the IMF with punishing terms. Meanwhile, the CONAIE’s political party, Pachakutik, failed to consolidate beyond the highlands and never emerged as a mass party.

Political scientists refer to Ecuador’s party system as “inchoate.” Most political parties lack a clear program, their constituencies defined less by ideology than by region. It was on this terrain, with social movements enervated but high levels of political disenchantment, that Correa and his party, Alianza País, emerged in 2006. Though there were some links between Alianza País’s founders and the organized left, the party and the campaign avoided relations with social movements (in stark contrast to Evo Morales’s Movimento al Socialismo). As political scientist James Bowen argues, since its inception Alianza País has functioned more as an electoral vehicle than a member-controlled political party. They proclaimed their movement a “Citizen’s Revolution,” a slogan that would soon be ubiquitous, emblazoning everything from the state newspaper to the thousands of billboards advertising public works projects. In this fantasy image, individuals would have direct access to the state, free from the interference of the press or unions or social movements.

Correa’s suspicion of movements notwithstanding, the CONAIE officially endorsed him in the run-off election against the conservative Álvaro Noboa; in official communiques, indigenous leaders referred to him as a “comrade.” Beginning with his landslide victory in that second round, Correa has been reelected twice; Alianza País has consistently secured a legislative majority (including a supermajority in 2013). In all four popular referenda that the party has proposed, including the one that would ratify the 2008 Constitution, the party’s position has won. Between 2007 and 2013, Correa’s government enjoyed an average approval rating of 66 percent; this dipped recently to 43 percent following the 2014 plunge in oil prices and the subsequent recession. Despite this decline, in the summer of 2016, Correa would have been voters’ top choice for president, if the constitution didn’t bar him from seeking another term. This electoral record is even more impressive compared to the performance of prior administrations: since the end of Ecuador’s dictatorship in 1979, Correa is the only president to have been reelected.

Correa reanimated classic tropes of Ecuadorian politics—he comes from a long line of politicians who have denounced all other politicians as irredeemably corrupt—but for the first time wedded them to a substantively pro-poor economic platform. Before his inauguration as president, he had never held elected office; a brief stint as a heterodox finance minister in 2005 earned him high approval ratings and anti-neoliberal street cred. He is a consummate campaigner and indefatigable orator: in the tradition of Castro and Chavez, every Saturday he gives an hours-long speech, broadcast live on radio and TV, interweaving expositions on public policy, crass humor, global affairs, and, for his enemies or wayward allies, biting insults.

Correa’s success was rooted in his administration’s model of commodity-dependent left-populism. The model goes by different names: officially, it is “socialism of the 21st century” or “post-neoliberalism”; indigenous and environmental activists call it “extractivism”; his political opponents, right and left, refer to it as “correísmo.” Beginning in 1972, when a nationalist military regime made recently discovered oil fields the centerpiece of their economic policy, Ecuador has been a “petrostate”: the revenues generated by oil extraction and export, undertaken by both state-owned and foreign companies, are the primary source of state income. Economic reliance on a small basket of exports is the prevailing economic model across the region, a paradigm with roots in colonial and independence-era patterns of dependency.

Beginning in 2000 and peaking in 2011, skyrocketing prices for oil, minerals, and soy reshaped South America. The rise in commodity prices bolstered economic growth and meant that resource-based revenues occupied an increasingly large portion of state budgets. Years of anti-neoliberal protest had demanded national control of resources to serve the people, rather than foreign capital. With the left coming to power across the continent, the influx of money to state coffers raised the possibility of fulfilling long-neglected social needs.

Regionally, then, the context was auspicious for a reassertion of the state over strategic industries. Many states began to pursue contracts with higher taxes and royalties. Though the US media framed these as forms of socialist expropriation, the contract models spanned the ideological spectrum. Anti-imperialist gesturing and public ceremonies accompanied so-called nationalizations in Argentina, Bolivia, and Venezuela, obscuring the fact that these were really forms of “forced divestments” that transferred a majority of shares to the state. Ecuador’s reforms were less interventionist, but they nonetheless included a higher tax on windfall profits, and a provision to channel the proceeds of surplus production to the state. Until the crash in 2014, oil financed about a third of the state budget.

In Ecuador—as in Bolivia, Venezuela, Brazil, and Argentina—the commodity boom was what enabled democratically elected leftist governments to govern from the left. Surplus was channeled into social programs. A hallmark of the Correa administration, and key for Alianza País’s constituency, is the monthly cash transfer program for low-income families, the Bono de Desarrollo Humano. Originally introduced under a different name as an emergency social compensation measure during the 1999 financial crisis, the Correa government increased the monthly disbursement (first to $35, not coincidentally Alianza País’s ballot number, and then to $50 in the 2012 election campaign) and the number of beneficiaries (although in the wake of the recent recession, the roll was reduced). Healthcare and education have likewise seen major state investment, about double what prior administrations spent. The effect overall has been enormous: poverty has dropped from 48 percent when Correa took office to 33 percent in 2014; inequality has gone down (Ecuador’s Gini coefficient lowered from 0.54 to 0.48); and health, quality of life, and education indicators—such as access to safe drinking water, or to primary and secondary education—have all improved.

Perhaps the most visible, and politically potent, state-led economic transformation has been the massive investment in public works: highways, ports, hydroelectric plants, irrigation projects, and a gleaming international airport right outside the capital. The difference is palpable: in 2008, I found that the bus ride from the southern highland city of Cuenca to Quito allowed plenty of time to watch all five original Rocky movies; given highway improvements, the current travel time would only allow for four.

Progress was not limited to more equitable development: the 2008 Constitution incorporates the Kichwa concept of sumac kawsay (living well), expands social and economic rights and the collective rights of indigenous and Afro-descendent peoples, and the rights of nature—the first constitution in the world to do so. The Correa government has also made laudable progress on tax and financial reform, including taxes on capital exports, windfall profits, and large estates, which are impressive given the region’s history of elite tax evasion.

For all the progress there has been an enormous underside. In purely economic terms, it is based on a model that is highly vulnerable to price volatility. Oil peaked at $112 a barrel in 2011, and then plummeted to $60 in 2014 and to the mid-$30s in 2015, before recovering slightly. Even before the price shock, and even with the substantial increase in tax receipts, spending outpaced revenues. In a petrostate like Ecuador, options are limited. One possibility is to increase oil revenue, whether by raising taxes or royalties, or by expanding production (but not both, as higher taxes mean less investor interest). National development plans (the Plan Nacional para el Buen Vivir for 2009–2013 and 2013–2017) envision a transition to a “post-extractive” economy, in the near-term—with the goal of maximizing investment in non-extractive sectors such as the “knowledge” economy and eco-tourism—but the oil and mining ministries have endeavored to squeeze every last drop of resource rents.

Although political scientists usually assume that petrostates tend to be authoritarian (the so-called resource curse), in Latin America commodity booms have actually consolidated certain democratic gains. Historically, domestic economic elites (in alliance with the US State Department) have constituted the main threat to democracy: with each extension of the franchise, they fear that popular rule will lead to the expropriation of wealth, and have either supported authoritarian coups, or opted for limited forms of democracy that preserve their prerogatives.

This is the context in which an extractive model is attractive. Revenues from oil and gas can fund social services and welfare spending, without requiring any major redistribution of property. Oil money funneled through the state does not deter private companies from reaping the profit. The result is a hydrocarbon-fueled social democratic bargain.

Other sectors rode the boom, too. Healthcare is a particular case in point. Universalizing access to healthcare, and making as many services as possible free at the point of sale, was a major priority for the Correa administration. While health outcomes have improved, as Pablo Iturralde’s research reveals, the result has mostly been a boom to private firms in the sector—the top two pharmaceutical companies now constitute a near duopoly of the market. Given the state’s current lack of capacity to directly provide medical care or manufacture generic drugs, and the fact that regulations of pharmaceutical companies (including whether they are based in tax havens) are either absent or under-enforced, state spending essentially subsidizes Big Pharma. A similar dynamic is at play for the exploding construction and real estate sectors. As their market share grows, so does their political influence, rendering it even less likely that the state will strengthen regulations on any of them.

In Ecuador, the boom also drove resistance. Confronting a state that had coopted their resource nationalist stance in order to promote the expansion of the extractive frontier, social movements now not only demanded compensation or regulation, but frequently opposed extraction altogether, holding community assemblies on projects and physically blockading state or firm access. 

In response, Correa and his ministers attacked activists as “infantile” or as imperialist tools, and criminalized protest. As of 2014, the administration had pursued legal action against around 200 people who engaged in peaceful protest of mining and oil policies, including targeting dozens of indigenous leaders.

With each episode of resistance, delegitimization and criminalization have been the inevitable state response, in turn provoking more militant resistance. Recently, the dynamic escalated: in the Amazonian province of Morona Santiago, a territorial conflict erupted between the indigenous Shuar community of Nankints and Chinese-owned Explorcobres over the San Carlos project. In November, residents of Nankints occupied the mining camp that had displaced their homes. After the military and police reestablished control, the Shuar occupied it again. On December 14, Correa declared a state of emergency (which was meant to last thirty days, but went on for three months). The camp and neighboring communities were cleared out by helicopters, tanks, gunshots, and incendiary bombs. Residents of the village of Nankints took refuge in the village of Tsunstuim; after a subsequent military raid, members of both communities fled into the mountains. According to witness accounts, two women gave birth in the forest, cutting their umbilical cords with a sharpened branch.

Although this was the first truly competitive presidential election in ten years, neither Moreno nor Lasso was an inspiring “outsider” candidate. Even Moreno’s ostensible differences from Correa—his subdued leadership style and openness to dialogue—reinforced his status as a calm representative of the establishment. Lasso, like many of his ideological brethren across the continent, identifies as the valiant opposition to the left-in-power but hails from some wounded fraction of the rich oligarchy. He served as president of Banco Guayaquil, Ecuador’s largest private bank, for eighteen years. Although he retired in 2012—ostensibly to devote himself to the Fundación del Barrio (“an NGO aiming to improve the quality of life of the poorest Ecuadorians”), and of course to prepare for his first run for president the following year—he continues to sit on the board, and controls a majority stake through an offshore trust. If the popular sectors were going to vote for such a candidate—and many of them surely did in this election—it was out of resignation, a null vote with a name on it, not enthusiasm.

Still, Lasso managed to siphon off some of Correa’s base. The entire southern Amazon voted for Lasso; he helped consolidate this constituency from the country’s poorest and most indigenous region with promises to enforce indigenous communities’ right to prior consultation, end oil extraction in protected areas, and stop criminalizing indigenous leaders. More generally, along with his commitment to “free markets”—the emblematic policy being the “free zones” (i.e. areas not subject to normal regulations and labor laws) for enterprise he proposed for coastal provinces—he promised not only to maintain the monthly cash transfer program, but to re-enroll former beneficiaries. (Moreno, upping the ante, vowed to triple it to $150. Moreno also proposed a new benefits package called Todo una vida: an effectively universal policy to ensure a basic standard of living from “conception to death,” a framing with the added benefit of resonance for socially conservative voters.)

Lasso’s commitment to maintain cash transfers may have been informed by his forays into market-based social uplift. During his tenure, Banco Guayaquil pioneered the “Banco del Barrio” program, a micro-deposit equivalent of micro-finance, housed in neighborhood minimarts, for those whose incomes fell below deposit minimums and were therefore excluded from formal banking. In other words, a potential market segment. But the micro-deposit they could make consisted largely of the monthly bono. The state was spending money to help back up Lasso’s banking empire; no wonder he wanted to maintain the bono’s existence.

It was not the first time Lasso had enriched himself at public expense. From August to September 1999, in the midst of a dire financial crisis, Lasso had served as a “super-minister” of the economy under President Mahuad. According to a multipart investigation in the Argentinian newspaper Página 12, over that same period Lasso owned 58 percent of the shares of Andean Investments Ltd., registered in the Cayman Islands, which in turn was a majority shareholder in the parent company of the Banco Guayaquil. During the five-day “banking holiday” declared by Mahuad in March of 1999, which suspended all financial transactions and froze all deposits, banks issued certificates to deposit-holders. A secondary market in certificates quickly emerged: bankers purchased them at 40 to 50 percent of their value; the state later bought them back at 100 percent of their value, bankrupting the central bank. Andean Investments, along with Lasso, was among the “vultures” that profited from the speculation.

Despite this sordid episode, Lasso portrayed himself during the campaign as an anti-corruption warrior, with clean hands and a deep commitment to transparency. As a stance, “anti-corruption” is ideologically agnostic, but has a particular affinity with neoliberal suspicion of the state and converts a problem at the level of the state under capitalism into one of individual malfeasance. Given Lasso’s deregulated dream-world (as reported in the Financial Times, Lasso’s shelves “are lined with books that inform his politics: Adam Smith’s The Wealth of Nations; The Denationalization of Money by Friedrich Hayek,” which the Mises Institute describes as a “radical case for the complete privatization of money”), “corruption” never implicated the extraordinarily wealthy or multinational corporations.

The narrative of chronically corrupt leftism was amplified by the proliferation of scandals across Latin America, where the nexus of oil, infrastructure, and state contracts had generated myriad opportunities for embezzlement. In early April, sixteen individuals connected to the state-owned Petroecuador were found guilty of bribery related to contracts for the refurbishing of the Esmeraldas oil refinery. Among them was Carlos Pareja, the former minister of hydrocarbons and onetime confidant of Correa. Earlier this year Pareja, currently a fugitive from justice facing an extradition order and with a mugshot on Interpol’s wanted list, released a set of dramatic videos (replete with theatrical music and footage of him submitting himself to a lie detector test) accusing other officials of a role in the scandal, including Jorge Glas, former minister of strategic sectors and Moreno’s running mate (Glas has denied all accusations). Meanwhile, the massive Brazilian construction firm Odebrecht admitted to paying $33.5 million in bribes to secure contracts in Ecuador (of a total of $788 million in 12 Latin American countries). Both of these stories were heavily covered by Ecuador’s oppositional private-owned media. Receiving much less attention, however, was Pagina 12’s revelation of the forty-nine companies Lasso has registered in tax havens, under pseudonyms and in a “Russian nesting doll” set of holding companies and trusts, and of the curious pattern of his assets moving in and out of the country timed with his presidential bids, in 2013 and 2017.

In any case, harping on corruption failed to win Lasso the election. More generally, as recent events in Brazil suggest, corruption by its nature resists partisan alignments. On the one hand, scandals often implicate across party lines. On the other hand, as a prototypical “valence” issue, like “democracy” or “economic growth,” anti-corruption does not divide voters; everyone is in favor of it. The Correa administration staked out its own position with a novel popular referendum on the question of tax havens. On February 19, 55 percent of voters voted in favor of barring those who have money in tax havens from holding office. If proven in court, Lasso’s holdings in Panama, the Cayman Islands, and Delaware would imperil any future political career.

What proved more pivotal than scandals or personality or concerns over Correa’s centralization of power was the bleak economic picture. Given the recession and recent austerity measures, “retrospective voting”—the limited, after-the-fact accountability mechanism afforded to citizens in a representative democracy—could have certainly handed Lasso a victory. As the run-off neared, however, Lasso played to his base, emphasizing his private sector entrepreneurialism, and Moreno to his, amplifying his promises for increased social spending. The traumatic memory of the neoliberal era, of unemployment and hunger and capital fleeing the country, dissuaded just enough voters from trusting a banking magnate to create “1 million jobs” or close the budget gap without inflicting even more pain on the least well off.

If in the final stretch before April 2 the campaigns veered right and left, for most of the election season both appealed to the imagined center, vying for voters disenchanted with the government yet not quite committed to the opposition. Well before the election, Alianza País had already slid further and further from its leftist commitments: a free trade deal with the European Union, the proliferation of “public-private” alliances such as the recent $500-million deal with Dubai-based DP World to build a port near Guayaquil, the massive selling-off of the Amazon to foreign oil and mining companies, and the disinvestment in the state pension fund, to name a few salient examples. In the popular imaginary of the neoliberal era, such policies would have been framed as the work of vendepatria (a Spanish word translated as “traitor” but more literally, “country-seller”) politicians.

Though there have been many protests in the capital against mining and oil projects, water and land laws, labor flexibilization, and—more strategically effective—resistance in the zones of new extractive projects, there has been no mass movement to rival the capacity, size, or duration of the cycle of the anti-neoliberal uprisings in the 1990s and early 2000s. Of course this is in large part because the life chances of the majority of the potential base of such a movement have on the whole improved—and because Alianza País filled the space opened up by decades of protest, at once claiming social movements’ legacy and enforcing their exclusion from policy-making. Although ongoing anti-extractive resistance—militant in the face of state repression, and at times effective in obstructing oil or mining projects—has put the state on the ideological defensive, a movement primarily based in directly affected communities faces the challenge of scaling outwards, and of more explicitly linking itself to the demands and grievances of other popular sectors. 

With the election behind him, the task of governance lies ahead. The forecast is decidedly mixed. Moreno faces a yawning deficit; mounting debt to China; a slim mandate. To drum up more oil means plunging deeper into the Amazon. Almost half of Ecuador’s remaining oil reserves are in the Ishpingo, Tambococha and Tiputini fields in Yasuní National Park. Moreno can double down on the extractive model by further diluting environmental regulations, lowering royalties, and sending in the military to crush the inevitable unrest. Or he can pray for oil prices to rise. Or he can further expand the tax base, risking elite defection (thousands of the upper class took to the streets in 2015 to protest increases in inheritance and capital gains tax). Regardless of which path he chooses, the next five years will be a lesson in what a Latin American new left government without a commodity boom and without a rousing leader looks like.

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